New York Fed chief throws support behind additional 2025 reductions
New York Federal Reserve president John Williams indicated support for additional interest rate cuts this year, citing mounting risks in the United States labor market and a less severe inflation outlook than previously feared.
In an interview with the New York Times, Williams said, “My own view is that, yes, we would have lower rates this year, but we’ll have to see exactly what that means.”
He emphasized that the central bank’s policy stance should evolve in response to incoming data, particularly if inflation edges up to around 3% and unemployment rises modestly.
Williams, who holds a permanent vote on the Federal Open Market Committee, clarified that the current labor market slowdown did not signal an imminent recession.
“The risks of a further slowdown in the labor market is something I’m very focused on,” Williams said. He pointed to recent declines in monthly job growth and growing employer caution as key factors behind his stance.
The Fed cut its policy rate by 25 basis points at its September meeting, a move described as “risk management” designed to balance persistent inflationary pressures with emerging weakness in employment.
The federal government shutdown could push the Federal Reserve to move its next rate cut from December to October, according to Oxford Economics, with the outlook for the economy potentially darkening. https://t.co/nAdMQZMz3S
— Mortgage Professional America Magazine (@MPAMagazineUS) October 1, 2025
Tariffs’ impact on inflation seen as limited
Williams downplayed the inflationary impact of President Trump’s tariffs, estimating they have raised the price level by only 0.25 to 0.5 percentage point.
“Underlying inflation seems to be moving gradually lower toward 2%,” he said, adding, “I don’t see any signs of second-round effects or factors that could be amplifying the effects of tariffs on inflation.”
Williams also noted that downside risks to employment were offsetting some of the upside risk to inflation.
Fed’s balancing act: Inflation and jobs
Minutes from the Fed’s September meeting showed officials were divided over the appropriate balance between restraining inflation and supporting the labor market.
Williams warned that allowing inflation to rise well above 2% without action would be damaging to the economy and the Fed’s credibility. Still, he stressed the need to minimize the risk of a sharper labor market downturn.
Fed officials remain split on the pace of future cuts. Governor Stephen Miran called for aggressive easing, arguing the bond market supports it, while Minneapolis Fed President Neel Kashkari warned that rapid cuts could reignite inflation and that mortgage rates may not fall even if the Fed acts.
Market participants anticipate further rate cuts at the Fed’s upcoming meetings, with investors pricing in additional easing by year-end. Williams’ comments reinforce the view that the central bank remains data-dependent, with a close eye on both inflation and employment trends.
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